a company is worth the sum of its discounted cash flows.

In plain English, this means that a company is worth all of its future profits a
dded together. And these future profits must be discounted to account for the ti
me value of money, that is, the force by which the $1 you receive in a year's ti
me is worth less than $1 you receive today.
Ws: who, where, what, when and why
who - who its CEO, CFO, COO and CIO are
where - You need to find out where these people come from, specifically, their e
ducational and employment backgrounds.
what and when - What is the management philosophy? In other words, in what style
do these people intend to manage the company? You can discern the style of mana
gement by looking at its past actions or by reading the annual reports, (particu
larly - management, discussion & analysis (MD&A) section of reports). Ask yourse
lf if you agree with this philosophy, and if it works for the company, given its
size and the nature of its business.
Why - A final factor to investigate is why these people have become managers. Lo
ok at the manager's employment history, and try to see if these reasons are clea
r.Does this person have the qualities you believe are needed to make someone a g
ood manager for this company? Has s/he been hired because of past successes and
achievements, or has s/he acquired the position through questionable like golden
spoon from promoters or relatives.
Know What a Company Does and How it Makes Money
A second important factor to consider when analyzing a company's qualitative fac
tors is its product(s) or service(s). How does this company make money? In fancy
MBA parlance, the question would be "What is the company's business model?"
Knowing how a company's activities will be profitable is fundamental to determin
ing the worth of an investment. Often, people will boast about how profitable th
ey think their new stock will be, but when you ask them what the company does, i
t seems their vision for the future is a little blurry. If you aren't sure how y
our company will make money, you can't really be sure that its stock will bring
you a return. You need a solid understanding of how a company actually generate
s revenue in order to evaluate whether management is making the right decisions.
Industry/Competition
Aside from having a general understanding of what a company does, you should ana
lyze the characteristics of its industry, such as its growth potential. Of cours
e, discerning a company's stage of growth will involve approximation, but common
sense can go a long way: it's not hard to see that the growth prospects of a hi
gh-tech industry are greater than those of the railway industry. It's just a mat
ter of asking yourself if the demand for the industry is growing.
Market Share
Market share is another important factor. Look at how Microsoft thoroughly domin
ates the market for operating systems. Anyone trying to enter this market faces
huge obstacles because Microsoft can take advantage of economies of scale. This
does not mean that a company in a near monopoly situation is guaranteed to remai
n on top, but investing in a company that tries to take on the "500-pound gorill
a" is a risky venture.
Barriers to Enter into Market
Barriers against entry into a market can also give a company a significant quali
tative advantage.
Compare, for instance, the restaurant industry to the automobile or pharmaceutic
als industries. Anybody can open up a restaurant because the skill level and cap
ital required are very low. The automobile and pharmaceuticals industries, on th

e other hand, have massive barriers to entry: large capital expenditures, exclus
ive distribution channels, government regulation, patents and so on. The harder
it is for competition to enter an industry, the greater the advantage for existi
ng firms.
Brand Name
A valuable brand reflects years of product development and marketing. Take for e
xample the most popular brand name in the world: Coca-Cola. Many estimate that t
he intangible value of Coke's brand name is in the billions of dollars! Massive
corporations such as Procter & Gamble rely on hundreds of popular brand names li
ke Tide, Pampers and Head & Shoulders. Having a portfolio of brands diversifies
risk because the good performance of one brand can compensate for the underperfo
rmers.
Keep in mind that are branded arround one individual
but Keep in mind that some stock-pickers steer clear of any company that is bran
ded around one individual. They do so because, if a company is tied too closely
to one person, any bad news regarding that person may hinder the company's share
performance even if the news has nothing to do with company operations. A perfe
ct example of this is the troubles faced by Martha Stewart Omnimedia as a result
of Stewart's legal problems in 2004.